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Generic Drug Makers Will Soon Face The Regulatory Music

According to modest estimates, around three-quarters of prescription medication in the U.S. are generics. Some reports put that number at 84%, with predictions as high as 87% for the near future. Meanwhile, research firm IMS Health found that, in 2012, money spent on prescription drugs decreased by 1%. It was the first such drop since IMS started tracking numbersin 1957.

That the proliferation of generics has driven down total costs is hardly surprising but the implications remain significant. Both health insurers and the government obviously understand that generics serve their fundamental cost control agendas. Since the insurers are worried about their ability to manage the cost of new customers under Obamacare, they now have even more incentive to encourage the use of generics.

It’s a boon for generic drug companies…well, sort of. While one part of the marketplace, including the government, is hell bent on lower cost, concerns in and out of government over the safety of generic drugs increase alongside their popularity. In fact, 43% of those polled last year by the Consumer Reports National Research Center have persistent misgivings.

Enter the U.S. Food and Drug Administration.

Earlier this month, it was reported that the FDA will issue a rule by September allowing generic drug companies to make changes in their labeling. Right now, only brand-name drug companies can update their safety information without FDA approval if they learn of a problem. Generic companies cannot make such additions unless the FDA orders them to or the brand-name manufacturer has already done so.

But once the FDA Rule becomes law, the generic drug makers will run the same risks as the brand-name drug companies. They would face unprecedented liability if their warnings or other label information don’t pass muster, and if their products injure consumers. Not surprisingly, consumer advocates were quite vocal in their support for the FDA’s proposed rule.

The FDA’s move comes on the heels of multiple recent Supreme Court decisions barring lawsuits against generic drug makers. The Court’s position is that, if the generic companies must by law use the same labels as the brand companies, they cannot then be sued for failure to warn, as long their labels have the exact same safety information as the brands. Critics of these decisions question the logic of allowing one company to be sued, and indemnifying another, for marketing the same product. But the FDA Rule could simply change the governing law and thereby moot the preemption of failure-to-warn claims upheld by SCOTUS.

On the other side of the argument, observers like Joseph Thomas, a partner at Ulmer & Berne, defend the disparity, pointing to differences in “knowledge base” that give the brand companies a decisive leg up in terms of R&D. Ostensibly, Big Pharma bears more responsibility and more risk because it has the resources to know more. Since Big Pharma has market exclusivity before patent expiration, their higher margins significantly offset the cost of resources necessary to pay for that greater responsibility.

“Many generic companies also do not have the personnel today necessary to fully analyze the risk profile of a pharmaceutical product,” Thomas advises us. “The system was designed that way with the intention that generic companies could get products to market and keep them on the market inexpensively.

“Creating a circumstance in which generic companies must hire scientists to evaluate incomplete data and speculate about labeling changes is not in anyone’s interest,” adds Thomas, who has represented the generic drug industry’s trade association, the Generic Pharmaceutical Association (GPhA).

Yet there’s a critical subtext here, which is all about public expectations. Predictably, as the generic industry expands, there will be something of a sea change in public attitude, of which the aforementioned Consumer Reports survey result is just one harbinger. Until now, for example, the generic companies have been cast in an appealing hero’s role, the plucky underdogs who offer the public financially critical alternatives to Big Pharma.

As healthcare industry growth patterns persist, it will be hard for the generics to maintain that role. Now they are Big Pharma, as the FDA’s proposed Rule implicitly confirms, and as the plaintiffs allegedly injured by generic drugs would likely agree. Meanwhile, consumer safety advocates are no longer just physicians or professors. They’re anyone who happens to own a computer and wants to warn his or her Facebook communities that a particular drug, branded or generic, might be dangerous.

Indeed, if there were ever an industry that needs a social media strategy, here’s one for sure – and they need it now, before the discussion period on the new FDA rule begins. They need to know what’s being said online, and they need to vigorously respond. They must tell a story that’s about safety as well as value, even as the denizens of the social media begin to focus on specific companies and specific drugs.

They must grapple, as they haven’t had to in the past, with a lingering instinctual doubt embedded in the consciousness of the consumer public – that a brand drug is at some level safer than a generic, especially when there’s a life-critical medical problem. The power of a safety buy dies hard.

In any event, the generic drug companies should act and plan under the assumption that they will be regulated. For starters, they need to view the regulators in the same way as Big Pharma does: as partners, not just pains in the neck. The vanilla public statement issued by Ralph Neas, GPhA’s President and CEO, seems a first safe step: “Our members have a long history of working closely with FDA to ensure that Americans have access to safe affordable generic medicines, and we look forward to working with FDA on this important issue.”

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I completely agree that the generic industry needs to shake up (start!) its social media activities to engage consumers about the safety and responsibility they have for the drugs they manufacture. However, the fact that the media still portrays the sector as a some kind of cowboy-run-sweat-shop is ridiculous and belittles what the FDA does. The generic drug industry is already highly regulated, operating to the same manufacturing and quality standards as ‘big pharma’. Billions were already spent on demonstrating the safety and efficacy of these drugs, big pharma quite rightly generated Billions in profit for the discovery. Requiring generic manufacturers to replicate much of the same data would be like asking manufacturers of X-ray or MRI machines to repeat the early research of GE to demonstrate the safety of the procedure. Just doesn’t make sense.

Good points, well-taken. However the issue still persists that we have a double standard in terms of liability, as the Supreme Court decisions show. If an X-ray manufacturer were to violate the standards that apply, the company could be sued irrespective of who did what research.

Great information. However, it is not mentioned that 80 percent of generic drugs come from India. Our government and the FDA are mainly concerned about profit and people are dying and have irreversible diseases from drugs. Further, the FDA must inspect generic drug companies every two years. (Per the Winston Salem Journal), but do not have the staff to do this. I, personally do not trust the FDA nor the government. Best advice to anyone purchasing prescription drugs is to do your homework. Ask your pharmacist where the drug is manufactured; research online all information you can find and discuss it with him and your doctor. Further, All drug trials have been done on men, and, if you are a woman, begin your drug treatment with the lowest dose possible per NBC National News and Dr. Oz. Last, be your own watchdog…